Even if there is a modest recovery in oil prices, an inflow of $1.5billion in concessionary loans and the dreaded second wave of the coronavirus (Covid-19) pandemic does not materialize, the naira could still weaken to N483 per dollar on the parallel market by the end of the year, analysts at Vetiva Research, have said.
The analysts who made the prediction in a note obtained by New Telegraph at the weekend, however, said that a second wave of the pandemic could push the naira to N499/$1 on the parallel market. The analysts said: “In our base case scenario, we expect the Naira to close the year at N379/$ and N483/$ in the official window and parallel markets respectively.
Our expectation is anchored on a moderate recovery in oil sales, an average oil price of $42/barrel, an inflow of $1.5billion in concessionary loans and the absence of the second wave of the COVID-19.
“A second wave of the virus could accelerate portfolio outflows and incite another round of devaluation to N400 in the official market, which could springboard into further depreciation of the Naira to N395/$ and N499 at the I&E Window and parallel markets respectively.”
With its foreign exchange reserves significantly impacted by the slump in the price of oil(the commodity that accounts for over 90 per cent of Nigeria’s export earnings) as well as the effects of the coronavirus crisis, the Central Bank of Nigeria (CBN), since the beginning of the year, has had to introduce a number of measures to conserve the reserves to be able to adequately meet forex demand and ensure exchange rate stability.
Although the naira appears to have stabilised against the dollar at between N457/$1 and N467/$1 on the parallel market in recent weeks, traders said that the forex scarcity is not likely to abate any time soon.
Commenting on the forex situation in their note, the Vetiva Research analysts said: “We believe the eyes of both domestic and foreign investors will remain on the forex unification efforts of the Central Bank of Nigeria. As highlighted in the short-term Economic Sustainability Plan, we expect further moves by the CBN to reduce arbitrage opportunities in the foreign exchange market.
We also look forward to new foreign exchange policies aimed at stalling the slide in reserves and provide support for the naira peg, barring the possibility of another slump in oil prices amid a budding coronavirus second wave